Dawn Primarolo: I have completed the annual review under section 141 of the Social Security Administration Act 1992. I propose the following changes to take effect from 6 April 2006. These rates and limits will also apply to national insurance contributions in Northern Ireland.
	Employers and Employees
	In line with the Social Security Contributions and Benefits Act 1992, the lower earnings limit for primary Class 1 contributions is to be raised to £84 a week. It is set at the level of the basic state pension for a single person from April 2006 and rounded down to the nearest pound.
	The primary and secondary thresholds for Class 1 contributions will continue to be aligned with the weekly amount of the income tax personal allowance, which will be increased to £5,035 from April 2006. The primary and secondary thresholds will therefore be increased to £97 a week. This means that no tax or Class 1 contributions will actually be paid on earnings below this level.
	The upper earnings limit for primary Class 1 contributions will be raised to £645.
	The self-employed
	The rate of Class 2 contributions will be frozen at £2.10 a week.
	Self-employed people with earnings below the annual small earnings exception can apply to be exempted from paying Class 2 contributions. This limit will be raised by £120 to £4,465 in line with inflation.
	The annual lower profits limit for liability to Class 4 contributions will increase to £5,035 a year (in line with the income tax personal allowance). The upper profits limit will increase by £780 to £33,540, to maintain the link with employees' earnings liable to Class 1 contributions.
	Class 3
	The rate of Class 3 voluntary contributions will be increased by 20 pence to £7.55 a week.
	Share fishermen
	The special rate of Class 2 contributions for share fishermen, which allows them to build entitlement to contributory Jobseeker's Allowance in addition to the other contributory benefits available to the self-employed, will be frozen at £2.75 a week.
	Volunteer Development Workers
	The special rate of Class 2 contributions for volunteer development workers, which entitles them to the full range of contributory benefits, will be increased by 10 pence to £4.20 in line with the statutory formula of 5 per cent. of the primary Class 1 lower earnings limit.
	Treasury Grant
	I need to ensure that the Fund can maintain a prudent working balance throughout the coming year. In accordance with section 2 (2) of the Social Security Act 1993,1 propose to do so by prescribing that the maximum Treasury Grant which may be made available to the Fund in 2006–07 shall not exceed 2 per cent. of the estimated benefit expenditure for that year. Similar provision will be made in respect of the Northern Ireland National Insurance Fund.
	I shall be laying a draft re-rating order before Parliament in due course. This will accompany a report by the Government Actuary to myself and my right hon. Friend the Secretary of State for Work and Pensions which we shall jointly present to Parliament.
	The following table sets out the rates, earnings limits and thresholds for National Insurance Contributions proposed for 2006–07.
	
		National insurance contributions, proposed re-rating, April 2006
		
			 Item 2006–07 
		
		
			 Lower earnings limit, primary Class 1 £84 
			 Upper earnings limit, primary Class 1 £645 
			 Primary threshold £97 
			 Secondary threshold £97 
			 Employees' primary Class 1 rate 11 per cent. from £97.01 to £645 plus 1 per cent. above £645 
			 Employees' contracted out rebate 1.6 per cent. 
			 Married women's reduced rate 4.85 per cent. from £97.01 to £645 plus 1 per cent. above £645 
			 Employers' secondary Class 1 rate 12.8 per cent, on earnings above £97 
			 Employers'contracted-out rebate, salary-related schemes 3.5 per cent. 
			 Employers contracted-out rebate, money-purchase schemes 1 per cent. 
			 Class 2 rate £2.10 
			 Class 2 Small earnings exception £4,465 
			 Special Class 2 rate for share fishermen £2.75 
			 Special Class 2 rate for volunteer development workers £4.20 
			 Class 3 rate £7.55 
			 Class 4 Lower profits limit £5,035 
			 Class 4 Upper profits limit £33,540 
			 Class 4 rate 8 per cent. from £5,035 to £33,540 plus 1 per cent. above £33,540

James Purnell: I am pleased to inform the House that I have today formally published the interim report of an independent panel that has been set up to consider whether the licensing fees are set at the right level.
	The panel's terms of reference are to:
	consider whether the fees cover the full cost to licensing authorities;
	identify the scale, extent and nature of any problems encountered by licensees/licence payers and licensing authorities;
	make recommendations about how the existing fee structure and levels could be developed;
	ensure best practice is being fully realised across all authorities; and
	identify how the regime could be developed to address any other issues including impact of the fees scales on sports clubs, village and community halls.
	While the panel, which includes representatives of local government, local communities and industry, has collectively concluded that it is too early to take a view on the current fee levels associated with the Licensing Act 2003, it has made the following initial recommendations to the Government:
	There should be a central source of information on fees addressed to licence payers, which explains why the system has changed, what the new system does for licence payers and their duties and responsibilities, as well as what licensing authority responsibilities are to licence payers.
	An annual date should be set for the payment of the annual fee with incentives for paying it.
	Consideration should be given to simplifying the application process, particularly in relation to advertising applications and clarification of the requirement for "professionally" drawn premises plans.
	There should be no impediment to licensing authorities making their monitoring, enforcement, and administration more efficient and cost effective.
	We will now fully consider the panel's recommendations.
	The interim report also identifies areas that the panel will now consider further, including:
	Licensing Authority income and costs.
	Licensing Authority inspection and enforcement regimes and the variability of Licensing Authority approach.
	The model for calculating fees.
	Simplification and number of applications.
	Temporary event notices.
	Not-for-profit groups (including sports clubs and village halls) and events and circuses
	Large events and festivals.
	The panel is due to publish a final report on the fee levels in the autumn of 2006. Where it is able to do so, it will make further recommendations in advance of its full report.
	I can re-affirm today that costs incurred by local authorities in meeting their requirements under the new Licensing Act will (provided they have been incurred legitimately and efficiently) be fully met by fees within the national fee regime. There should therefore be no liability for the council tax payer because of the new licensing regime. My Department and the Local Government Association will work with the independent fees review panel as a matter of urgency to agree the process for verifying these costs.
	Everyone involved in the new fees system can rest assured that, if evidence proves that the current system needs fine-tuning, we are fully committed to doing just that.
	Copies of the report have been deposited in the Libraries of both Housesand are available at www.culture.gov.uk.

Phil Woolas: I have today presented the provisional Local Government Finance Settlement for 2006–07. Included in the announcement was the distributable amount of National Non-Domestic Rates in England for 2006–07 to be redistributed to local authorities, which will be £17.5 billion.
	The provisional national non-domestic rating multiplier for 2006–07 is 0.433 (43.3p in the pound) and the provisional small business non-domestic rating multiplier for 2006–07 is 0.426 (42.6p in the pound).
	The calculation of the distributable amount for 2006–07 is set out in the table below.
	
		Calculation of distributable amount for 2006–07 £ million
		
			   2002–03 2003–04 2004–05 2005–06 2006–07 
			   Outturn Provisionaloutturn Provisionaloutturn Provisionaloutturn Estimatedcontribution 
		
		
			 1. Income from local lists 
			  Multiplier (p) 43.7 44.4 45.6 41.5 42.6 
			  Gross rate yield in respect of current year 17,195 17,463 17,844 19,165 20,103 
			  (i) Reliefs 
			  (a) Net Transitional Relief -182 -120 -125 -452 -300 
			  (b) Net Small Business Rate Relief — — — -25 0 
			  (c) Empty or partly occupied properties -1,144 -1,219 -1,288 -1,294 -1,357 
			  (d) Charitable -602 -616 -645 -674 -707 
			  (e) Rural shops and post offices -6 -6 -6 -6 -6 
			  (f) Community amateur sports clubs — — -4 -6 -6 
			  (g) Former agricultural premises 0 -1 -1 -1 -1 
			  (h) Discretionary -42 -39 -36 -39 -40 
			  Net rate yield in respect of current year after reliefs 15,220 15,464 15,739 16,669 17,685 
			  (ii) Collection costs and other reductions to contributions 
			  (a) Costs of collection -84 -84 -84 -84 -84 
			  (b) Losses on collection -106 -93 -115 -113 -113 
			  (c) City of London offset -7 -7 0 0 0 
			  Total contribution in respect of current year 15,024 15,280 15,540 16,473 17,489 
			  (iii) Prior year adjustments 
			  (a) Interest on repayments -59 -78 -64 -12 -6 
			  (b) Repayments -479 -803 -789 -342 -156 
			  Total prior year adjustment -538 -881 -853 -354 -162 
			  Net rate yield from local lists 14,485 14,399 14,687 16,119 17,327 
			 2. Income from Central list 
			  Net central list yield 1,044 1,029 1,037 1,102 1,000 
			 3. Income from the former Crown list 
			  Contributions in lieu of rates 8 10 10 11 10 
			  Total yield 15,537 15,438 15,734 17,231 18,337 
			 4. Exchequer Contributions 
			  Exchequer contribution towards transitional relief 41 111 77 0 0 
			  Total NNDR pool payments (= 1+2+3+4) 15,578 15,549 15,811 17,231 18,337 
			 5. Adjustments 
			  Surplus brought forward 133 -915 -966 -155 -923 
			  Combined total 15,711 14,634 14,845 17,077 17,413 
			  Distributable amount 16,626 15,600 15,000 18,000 17,500 
			  Surplus carried forward -915 -966 -155 -923 -87 
		
	
	Notes:
	The above calculation involves estimating several figures that are inherently difficult to forecast accurately, such as the gross rate yield and the prior year adjustments. The resulting figure of £17.413 billion has therefore been rounded to £17.500 billion exactly to avoid spurious accuracy.
	For 2002–03, 2003–04 and 2004–05, the amounts shown are generally those reported on the outturn (NNDR3) returns, with those for 2003–04 and 2004–05 being regarded as provisional in advance of the receipt of audited returns from all billing authorities. For 2005–06, the amounts shown are the provisional outturn for the year based upon authorities' provisional contributions to the non-domestic rating pool, largely as reported on NNDR1 and—where submitted—NNDR2 returns. For 2006–07, the estimates are based on:
	1. Item 1: The gross rate yield represents the estimated effective total rateable value of non-domestic hereditaments on local rating lists multiplied by the small business non-domestic rating multiplier of 42.6p. The supplement of 0.7p that is also applied to businesses paying for the small business rate relief is not included, and neither is the small business rate relief included within the reliefs at item l(i). This reflects the fact that the income from the supplement is intended to equal the cost of the relief nationally, resulting in a zero net effect upon the Distributable Amount.
	2. Item l(i)(a): the cost of the transitional reliefs in 2006–07 is estimated to be £300 million, to reflect the fact that the increase in the multiplier for 2005–06 onwards to take account of expected losses from appeals has had an impact upon the in-year revenue neutrality of the transitional arrangements. At least part of this cost will be recouped once the appeals take effect, and the power exists to adjust the multiplier in later years as necessary.
	3. Item l(i)(b): net small business rate relief. This is assumed to be zero: see note 1, above.
	4. Item l(i)(c): The empty properties relief includes voids and partially occupied hereditaments.
	5. Item l(i)(d): Charitable rate relief.
	6. Item l(i)(e): Rural Shops and Post Office relief. Figures include mandatory relief for general stores and post offices under the Local Government and Rating Act 1997.
	7. Item l(i)(f): Community Amateur Sports Clubs (CASCs). This is mandatory rate relief for sports clubs registered with HM Revenue and Customs (formerly Inland Revenue) as Community Amateur Sports Clubs under the Section 64 of the Local Government Act 2003, which came into effect on 1 April 2004.
	8. Item l(i)(g): Discretionary relief granted to charities, non-profit making organisations and for other reasons including discretionary relief for village shops and post offices under the Local Government and Rating Act 1997.
	9. Item l(ii)(a) and (b): The allowances for the costs and losses incurred by authorities in collecting non-domestic rates from ratepayers.
	10. Item l(ii)(c): City of London offset—the amount which the City of London is not required to pay into the non-domestic rating pool. It has been set to zero for 2004–05 onwards.
	11. Item l(iii): net adjustment in respect of appeals and other amendments to the rating list affecting liability for previous years rates settled in that year: comprising repayments and associated interest payments.
	12. Item 2: a forecast of the rateable value of non-domestic hereditaments on the central rating list multiplied by the multiplier, less the net effect of transitional arrangements, and adjusted for appeals and other changes in respect of previous years.
	13. Item 3: Almost all properties previously included in the Crown List are now included in the local list figures at item 1.
	14. Item 4: the contribution from central government to offset the amount of the Secretary of State's estimate of income foregone as a result of transitional arrangements is assumed to be zero for 2006–07.

Jack Straw: As presidency of the European Union, Her Majesty's Government is today circulating to all member states of the European Union for discussion comprehensive proposals for the European Union budget in the next financial period 2007–13 inclusive. Copies of the proposal are available in the Library of the House and in the Vote Office.
	This written ministerial statement outlines the context of the proposal. These budget proposals have four policy objectives:
	The first is tough budget discipline. They are below the level proposed by the Luxembourg presidency in June and 17 per cent. below the level proposed by the Commission.
	Second, they help the new member states in the enlarged EU by building their economies and societies, and they more fairly distribute the costs among the better off nations. The UK is offering an extra contribution to these costs of enlargement amounting to 8 billion euros over the budget period.
	Third, these proposals keep the rebate. Indeed the rebate will rise, from an annual average over recent years of 5 billion euros to around 7 billion.
	Fourth, these proposals ensure there can be no fundamental change in the rebate without fundamental reform of the Common Agricultural Policy. All spending, including on agriculture, will be subject to a review during the coming budget period.
	Let me explain in more detail.
	The budget overall
	Last year the commission proposed a budget of 1,025 billion euros, or 1.24 per cent. of the total national income of all member states (GNI). We said all along that this was far too high. There would be no chance of any serious budgetary reform in specific areas without strong downward pressure overall. Given this, and the demand of the six "budget disciplinarians" [France, Germany, Sweden, Austria, Netherlands and UK], the Luxembourg presidency reduced their proposed budget to 1.06 per cent. or 871 billion euros. This latest proposal would further reduce the budget to at 847 billion euros or 1.03 per cent. [on the commitments basis] and by the end of the budget period spending will be below the 1 per cent. level the six had proposed. This would be a major achievement.
	It is important to see these proposals in a longer-term context. EU spending hit 1 per cent. of GNI in 1985 and rose rapidly under Baroness Thatcher and Sir John Major as a proportion of national income, by a quarter to 1.25 per cent. by the early 1990s. and it started to come down only in 1998. These proposals would bring it down further.
	Enlargement
	The new member states will receive 150 billion euros in structural and cohesion funding. That is an enormous amount and would represent very large new funds. Total funding through all EU programmes to the 10 new member states is worth twice the Marshall plan which funded the reconstruction of Western Europe nearly 60 years ago [at today's prices].
	And we are ensuring that these countries will be able to spend much more of what they have been allocated. This is a very important point because the record shows that year by year both the existing and new member states have not been able to spend their full allocation for many technical reasons. We have included a series of very practical changes to ensure that they are better able to do so. This means that while headline entitlements are lower by 14 billion euros than in the June proposals, we are confident that all these countries will be better able to spend what they have been allocated. And we are proposing strengthened financial management arrangements.
	Under our proposals, for example, Hungary would receive 22 billion euros in structural and cohesion funding the Czech Republic 23 billion euros and Poland 56 billion euros.
	Of course there are those who ask why our taxpayers in western Europe should pay for roads, railways and other reconstruction projects in the east, the answer is that all enlargements have benefited all members economically by increasing the total volume of EU trade, investment and jobs in which all have a share. British trade with the new member states has already increased by 400 per cent. since 1990, 10 times the rate of growth with the rest of the world. That is an indication of the economic potential we will be helping to unlock by making this investment in Europe's future. It is very much in Britain's national interest for the world's largest single market to grow and become more prosperous. And the benefits of enlargement are not just economic. It must be in Britain's interest to have increasingly stable societies in Eastern Europe.
	The UK contribution
	As I have spelt out, and as these proposals make clear, the UK Government recognises its responsibility to pay a fair contribution to the cost of enlargement—an historic project supported across the political divide. It has been a strategic objective of successive British Governments and, happily, has enjoyed very active all-party support. The Opposition parties have called for significant increases in structural and cohesion funding in Central and Eastern Europe. This budget delivers that objective. But it has to be paid for. We all prepared to pay our fair share, but no more than our fair share.
	As EU spending shifts from older member states to the new, the British contribution will inevitably rise, along with the contributions of all the EU 15 member states. But the proposals tabled by the Luxembourg presidency would have left us with a bill of more than 20 billion euros over and above the 50 billion euros that would be our contribution under existing arrangements. That was not acceptable then, nor is it now. The proposal we have tabled today will take our contribution to 58 billion over the seven-year period of the budget.
	This is the equivalent of halving the value of the rebate in respect of structural and cohesion funding in the 10 new member states. This could be achieved either by not applying the rebate to a proportion of structural and cohesion funding in the new member states, or by a technical route to increasing our gross contributions.
	The UK will in any event continue to receive the full value of the rebate as it applies to the Europe of 15, and to all CAP spending throughout the union. And the rebate will rise, because it increases in proportion to our net contribution. The rebate will increase from an annual average of 5 billion euros in the current financial period, to around 7 billion.
	The rebate was negotiated in 1984, but it did not prevent a very significant rise in the EU's take of member states' national income. Nor did it deal with the underlying problem which made the rebate necessary. And it did not prevent the UK paying twice as much as France and Italy, countries with similar sized economies. With these proposals today, Europe's spending comes down as a proportion of income. And for the first time since the UK joined 30 years ago, we would pay roughly the same as France and Italy as a share of national income.
	Reform
	This is a budget which seeks to invest in Europe's future, and not only through enlargement.
	Our proposals provide for a comprehensive and wide ranging review, covering all aspects of revenue and expenditure, including agriculture. This will be conducted by the Commission, which will submit a report in 2008. On the basis of the review, the EU would be able to make changes in the 2007–13 financial period.
	Conclusion
	We have always made clear our overall aim is to secure fundamental reform of spending which would remove the underlying justification for the rebate. The mechanism we propose for a review both of revenue and expenditure undertaken by the Commission would put us on a pathway to a reformed European Union better able to compete in the global economy. The budget we have circulated today is a tough package which recognises the responsibilities of all members of the EU to both pay a fair contribution towards the future well being of the Union.
	It provides a sound basis on which all our citizens can thrive in an enlarged European Union.
	A bigger, more prosperous European Union means a stronger, more prosperous Britain. These are good proposals for the UK and good proposals for Europe.

Hazel Blears: I have today placed in the Library a copy of the Home Secretary's proposals for allocation of police grant for England and Wales in 2006–07 and 2007–08. The Home Secretary and I intend to implement the proposals subject to consideration of any representations and to the approval of the House.
	This Government have put unprecedented levels of investment into the Police Service in England and Wales in recent years. This investment has helped to expand local policing, reduce crime and help to make our communities safer. Police Officer, Police Staff and Community Support Officer numbers are all at record levels, police performance continues to improve and the police have never been better equipped with the tools and powers to respond to the needs of local communities. On a like for like basis Government grant and central spending on services for the police will have increased by 56 per cent. or almost £4.0 billion between 2000–01 and 2007–08.
	Our ambitious police reform programme continues to produce real improvements but there is still more to do to ensure that the Police Service meets the challenges of the 21st century. People are safer now but we want them to feel safer too. Key elements of the reform programme are about building a responsive, accessible police service which successfully tackles local concerns about crime and anti-social behaviour. As part of this, we are committed to ensuring that every neighbourhood has a neighbourhood police team by 2008; to continuing to modernise the police workforce to ensure it is able to deliver a more responsive, citizen focused service that the public want; and to reshape the national policing landscape to ensure it is able to meet the policing challenges of the modern world. A key part of this is the reconfiguring of the service around larger strategic police forces which will have sufficient capacity and capability to provide the full range of protective services to the public alongside responsive neighbourhood policing.
	The National Community Safety Plan, which incorporates the National Policing Plan 2006–09, was published on 16 November. Our key policing priorities are to reduce overall crime; bring more offenders to justice, provide dedicated, visible, accessible and responsive neighbourhood police teams, tackle serious and organised crime including improved intelligence and information sharing between partners and protect the country from both terrorism and domestic extremism. The police funding settlement for the coming two years will support the priorities outlined in the plan.
	This year, for the first time, the Government are providing planning totals for two years. Total provision for policing grants and central spending in 2006–07 will be £10,570 million, an overall increase of 5.0 per cent. This includes an increase of 3.4 per cent. in general grant (including a small increase to take account of losses from Amending Reports).
	Indicative figures for 2007–08 are an overall increase to £11,047 million (4.5 per cent.) with an increase of 3.7 per cent. in general grant.
	In this statement, I want to outline provision for support for the Police Service in England and Wales.
	The police grant settlement
	We propose to distribute the settlement as set out below. The table includes funding for both local and central spending.
	
		Table 1: Police funding settlements for 2006–07 and 2007–08 compared with 2005–06
		
			  Year on year increase 
			   2005–06 2006–07 2007–08 2006–07 2007–08 
			   £m £m £m % % 
		
		
			 1. Direct funding for police authorities: 
			  Home Office Police Grant 4,574 4,714 4,831 3.1 2.5 
			  Transfers for Pensions and Dedicated Security Posts (DSPs)(1) -498 -576 -591 
			  RSG/NNDR 3,044 3,229 3,397 6.1 5.2 
			 Total General Formula Grant 7,120 7,367 7,637 3.4 3.7 
			  Specific Grants for police authorities 559 588 840 5.2 42.9 
			  Special Formula Grant(2) 193 193 193 0.0 0.0 
			  Transfers for Pensions and DSPs 498 576 591 15.7 2.6 
			 Total Specific Grants etc 1,250 1,357 1,624 8.6 19.7 
			 2. Capital Grants and Support 362 413 370 14.1 -10.4 
			 3. Central Spending 1,333 1,433 1,416 7.5 -1.2 
			 Grand Total 10,065 10,570 11,047 5.0 4.5 
		
	
	(1) The transfer from general grant for police pensions and dedicated security are noted below.
	(2) Details are set out later in the statement.
	Police funding proposals within the Local Government finance system are being announced by my hon. Friend the Member for Oldham East and Saddleworth today, and by the Welsh Assembly Government.
	Provisional general policing grants (ie Home Office Police Grant, Revenue Support Grant and National Non Domestic Rates) for English and Welsh police authorities in 2006–07 and 2007–08 compared with 2005–06 are given in Tables 2 and 3. The figures for 2006–07 take into account our proposed amendments to the settlements for 2004–05 and 2005–06.
	With my right hon. Friend the Deputy Prime Minister, we have reviewed the Police Grant formula. We have decided to use the most comprehensive and technically robust option, on which we consulted during the summer, as a basis for formula change. We have updated the existing 1995 formula that used data from the early 1990s, to bring it in line with modern conditions. At the same time, we are concerned to maintain stability of funding during a period of major structural change. We have therefore decided to apply a broadly flat rate increase for all Police Authorities for 2006–07 and 2007–08. This will be 3.2 per cent. and 3.7 per cent.
	The settlement continues to take account of our commitment to improve efficiency and effectiveness in the police service. We expect the police service to build on impressive efficiency gains of £316 million (3.24 per cent.) in 2004–05 and projected gains of £360 million (3.5 per cent.) for 2005–06 through continued focus on the target of £1,069 million of cumulative gains by the end of 2007–08. Half these gains are to be cashable. The greater certainty over funding for 2007–08 should help forces and authorities plan to meet this target. The Home Office, the Association of Chief Police Officers (ACPO) and the Association of Police Authorities (APA) will continue to work in partnership to deliver cumulative year on year improvements in the value for money to deliver the efficiency targets.
	If Police Authorities deliver efficiency gains, and exercise judicious financial planning, there is no reason for them to set excessive increases in police precepts on council tax next year. The Government's policy in relation to average council tax increases of less than 5 per cent. in each year in 2006–07 and 2007–08 has been clearly set out by my hon. Friend the Minister for Local Government. The Government are prepared to take capping action if necessary.
	Amending Reports
	Details of the Amending Report for 2004–05, to take account of changes to ONS population data, and the Amending Report for 2005–06, chiefly to take account of changes to pensions' data from Derbyshire and Lancashire, were set out in my written statement of 31 October. The Government made clear in the Consultation Paper on formula grant distribution that they would apply the same approach to grant adjustment as they did in relation to the 2003–04 Amending Report. We have therefore adjusted 2006–07 grants to ensure that any authority owing money under the Amending Reports will be able to pay it back in 2006–07 and still be left with at least the broadly flat rate grant increase over 2005–06. The consultation period for both Amending Reports will end on the same date as the consultation on the funding settlement proposals 2006–07 and 2007–08 on 11 January 2006.
	Welsh police authorities
	We have for several years ensured that Welsh Police Authorities were treated in line with English Police Authorities with respect to the floor damping mechanism. In 2006–07 and 2007–08 we have adjusted the Home Office Police Grant of Welsh Police Authorities to maintain consistency with the English. The Home Secretary has provided additional support of £7.8 million in 2006–07 and £11.3 million on 2007–08 to ensure that Dyfed-Powys Police Authority, Gwent Police Authority and North Wales Police Authority receive at least a minimum increase in grant in line with English authorities. The shortfalls are further funded by scaling police grant to South Wales Police Authority which would otherwise have received a general grant increase of around 6 per cent. but now receives the equivalent increases to a police authority in England in both years.
	Metropolitan Police funding
	I have changed the provision for the Metropolitan Police special payment to reflect wider formula changes. I have allocated annual formula increases of £5 million in 2006–07 and 2007–08 and £15 million is added for the higher costs of Metropolitan Police Authority civil staff pensions. At the same time I have reduced the provision by £50 million as part of the consolidation of Counter Terrorism funding and this will be included within the Metropolitan Police Service's (MPS's) allocation within the Single Consolidated Fund.
	Special formula grant
	Over the past five years specific grants have been a very effective tool in delivering key aims and targets and funding new policing initiatives. We have made it clear over the past few months that we wanted to give police authorities more control over specific grants. We have therefore decided to consolidate four specific grants into a single pot for each authority. Each authority will get the actual or estimated level of funding it receives from these grants. We hope that this rationalisation will enable authorities to operate more flexibly. However we will expect authorities to honour commitments and agreed policy initiatives to build on the outstanding successes that these grants have so far achieved. Totals for each Police Authority are set out in the draft Police Grant Reports 2006–07 and 2007–08. The special formula grants are:
	The Rural Policing Fund (£30 million)
	The Rural Policing Fund was introduced in 2000–01 to target funds specifically at forces that police the most sparsely populated areas.
	Special Priority Payments (£69 million)
	Special Priority Payments are an integral part of the police pay system, enshrined in regulations following the Police Negotiating Board agreement in 2002.
	London and South East Allowances (£48 million)
	These allowances were introduced from 2001–02, following a recommendation by the Police Negotiating Board, to address specific recruitment issues in the South East.
	Forensic Grant (£46 million)
	The benefits to crime detection since this grant was introduced in 2000 have been enormous. It is important that the police service maintains the capacity that has been developed for the efficient and effective collection and use of DNA material from individuals and crime scenes. Without sampling of newcomers to crime and the collection of DNA samples from crime scenes, the benefits of the previous investment in the detection of crime and the benefits of legislative changes introduced by the Government allowing the DNA sampling of persons when arrested, will be reduced. The Home Office will continue to monitor and report on the use of forensics, particularly DNA, by forces in dealing with the investigation and detection of crime. Any significant changes will be highlighted and an explanation will be sought from the forces concerned.
	Specific grants for police authorities
	Police Authorities will continue to receive extra funding through a number of specific grants for particular schemes. Targeted grants were introduced as a direct response to what the police service and the public told us they wanted. Total provision for specific grants in 2006–07 is £588 million and in 2007–08 is £840 million (Table 4).
	The main specific grants are:
	Crime Fighting Fund:
	£277 million will again be made available to forces to continue to support the costs of officers recruited through the Crime Fighting Fund. This Fund has been remarkably successful in helping the police service boost its strength which is at a historically high level of more than 141,000. In response to concerns raised by both Chief Constables and Police Authorities we have relaxed the terms of the Fund this year and are willing to discuss with the service further flexibility in the use of this money from 2006–07.
	Community Support Officers (CSOs):
	CSOs free up police officer time, provide reassurance and have powers to deal with aspects of anti-social behaviour and low level crime. This settlement honours our undertaking given in "Neighbourhood Policing—your police; your community; our commitment" (March 2005) to provide £88 million in 2006–07 and £340 million in 2007–08 to support our target of 24,000 CSOs by 2008. Details were set out in letters to Chief Constables and Police Authorities on 7 November 2005. In addition to this, for 2006–07, we have allocated £44 million for continuing support of CSOs recruited in the first three rounds from 2002 onwards and this support will continue in 2007–08.
	Basic Command Unit (BCU) Fund:
	£50 million will again be provided for BCUs. These are at the forefront of local policing. The grant will again be targeted towards forces with BCUs in high crime areas to help reduce crime in partnership with Crime and Disorder Reduction Partnerships. All forces in England and Wales will continue to receive a share of the grant. BCU Commanders will again have discretion locally to pool their allocations with the new Safer and Stronger Communities Fund.
	Initial Police Learning and Development Programme (IPLDP):
	We have worked with the Central Police Training and Development Authority (Centrex), to calculate the maximum savings that we believe can be transferred from their foundation training budget to IPLD programmes in forces next year and the following year. £13 million will be transferred to forces from Centrex's baseline in 2006–07, with the remaining foundation training budget becoming available in 2007–08. With this, and with funding that was removed from the Centrex baseline this year, we are able to increase substantially the funding per recruit that is available to forces for their initial police learning and development programmes. Some funding will remain with Centrex in 2006–07 so that they can continue to deliver foundation training for the first two months of the financial year. Each force, with the exception of the MPS (whose money for training is already included in their baseline funding, and who do not currently send recruits to Centrex for training), will receive £3,000 per IPLDP recruit in 2006–07 and 2007–08. Payment will be made up to the level of recruits that each force needs to maintain their force strength at 31 March 2005. This compares with just over £1,900 per recruit that we were able to make available to forces this financial year.
	Counter Terrorism funding
	As a result of recent events the Government consider that policy and funding for Counter Terrorism should be more closely linked to improve effectiveness. We have therefore drawn together existing grants, including the provision for Dedicated Security Posts formerly in general grant, into a single consolidated grant for Counter Terrorism. We will be augmenting the amounts transferred from general grant for counter-terrorism and the increase will be announced shortly. Within the increase in general grant to police authorities in 2007–08 we have made provision of £25 million to enable authorities to enhance further their counter-terrorism capability.
	We are currently working very closely with ACPO on this matter. We see an important role for ACPO in the management of this grant and for ensuring coherence, strategic direction and for the provision of a nationally co-ordinated response. We will work closely with ACPO to ensure that both this uplift and funding from the new consolidated Counter Terrorism grant are used to create a significant increase in the strength of the police's counter-terrorism capability.
	While we have included the MPS within the scope of this grant we are all conscious of the very important contribution that the MPS provides to our counter terrorist effort—not least its anti-terrorist investigation capability—and its vital role in protecting our capital city and its citizens from the terrorist threat. On that basis we believe that we should continue to fund the service separately so that Parliament is assured that the MPS's national capabilities are effectively funded.
	Both we and ACPO are committed to ensuring that the Police Service both nationally and regionally has a robust, resilient and effective Counter Terrorist capability.
	Police authority capital
	The Home Secretary and I intend to allocate provision of capital grant for 2006–07 and 2007–08 later this month. We propose to plan grant allocation over the two years to take into account prospective force amalgamations.
	Safer and Stronger Communities Fund
	The newly created Safer and Stronger Communities Fund was rolled out to all Local Authorities in England in 2005–06. It brings together existing Home Office and ODPM funding streams. This Fund will total a minimum of £220 million in 2006–07, the Home Office contributing a minimum of £70 million resource and £20 million capital. The police service, subject to the agreement of other local partners, will be able to draw upon these funds to support local crime reduction initiatives. The Home Office Crime Team within the Welsh Assembly is currently liaising with the Home Office on establishing similar arrangements for Wales.
	Asset Recovery Police Incentivisation scheme
	This scheme boosts asset recovery by giving forces a direct stake in the proceeds they generate from the work. The police service received £13 million in 2005–06 (one third of the total assets recovered over and above £40 million in 2004–05). This will increase to one half in 2005–06 payable in 2006–07 with the maximum benefit available to the police of £65 million. From 2006–07, under a new incentive scheme, all asset recovery agencies including the police will receive back 50 per cent. of what they recover.
	Serious Organised Crime Agency
	Work is on track to launch the new Serious Organised Crime Agency (SOCA) on 1 April 2006. It is intended for the precursor agencies to begin transferring business to SOCA from January in order to ensure a smooth transition. SOCA's strategy for 2006–07 is based on a workforce strength of 4,250 staff and an initial budget of £400 million, including provisions to be made from HM Revenue and Customs and the UK Immigration Service.
	National Policing Improvement Agency
	We intend to establish the National Policing Improvement Agency (NPIA) on 1 April 2007, subject to legislation. The aim of the NPIA is to introduce a radically different model of police service leadership as well as producing greater efficiency, consistency and clarity of purpose in service delivery. The NPIA will be a new organisation that rationalises several other bodies. The agency's purpose will be to drive improvement in the police service. It will replace the existing organisations Centrex and the Police Information Technology Organisation (PITO). There will also be significant implications for the work of ACPO, the Home Office and the APA. Budgets for precursor agencies will be announced by 31 January.
	Pensions
	With effect from April 2006 a new financial arrangement for funding police pensions will commence. This will replace the present practice whereby each police authority is responsible for paying the pensions of its former employees on a "pay-as-you-go" basis. The new system will eliminate the effect of the volatility resulting from significant fluctuations in the number of police officers retiring in any given year and consequently reduce cost pressures being passed on to council tax precepts. It will also introduce greater transparency by making clear the actual level of resources available for service delivery.
	Under the new arrangements Police Authorities will continue to be responsible for paying pensions to former police employees and to receive grant funding to support the employers' contributions. Any deficits on an authority's net pension costs will be met from a central specific grant managed by the Home Office. To create this central pension pot £313 million for 2006–07 and £328 million for 2007–08 has been held back from the funding settlement. The new arrangements will be cost neutral. The aggregate amount held back will be used to reimburse authorities for their actual pension costs shortfall.
	Details of the new funding arrangements were set out in my statement of 29 November.
	Conclusion
	We have listened very carefully to all stakeholders in determining this settlement. We have provided the investment to deliver record numbers of Police Officers, Police Staff and an expanding number of CSOs and have provided the police with new tools to tackle the crimes that concern communities most. We will continue to work closely with the police to improve their efficiency and responsiveness to local communities. Our proposals will ensure that all forces in England and Wales receive a fair share of resources in the coming two years, in a time of radical restructuring that will give the police the organisation they need to face the challenges of the future.
	
		Table 2: Police grant allocations by English and Welsh police authority 2006–07
		
			 Police 2005–06AdjustedAmendedAllocation 2 2006–07FormulaGrantAllocation 1 Change on2005–06AdjustedAmendedAllocation 2004–05AmendingReportReceipts/Payments 2005–06AmendingReportReceipt/Payments 2006–07AllocationNet ofAmendingReportReceipts/Payments Change on2005–06AdjustedAmendedAllocation 
			 Authority £m £m % £m £m £m % 
		
		
			 English Shire forces 
			 Avon & Somerset 152.2 157.7 3.6% 0.0 -0.1 157.6 3.5% 
			 Bedfordshire 61.6 64.0 4.0% -0.2 -0.2 63.7 3.4% 
			 Cambridgeshire 71.5 73.8 3.3% 0.2 0.0 74.0 3.5% 
			 Cheshire 107.5 110.9 3.2% 0.2 0.2 111.4 3.6% 
			 Cleveland 87.1 89.9 3.2% 0.2 0.1 90.1 3.5% 
			 Cumbria 59.4 61.8 4.0% -0.2 -0.2 61.4 3.2% 
			 Derbyshire 97.8 101.1 3.4% 0.0 0.3 101.4 3.7% 
			 Devon & Cornwall 166.2 171.5 3.2% 0.0 0.0 171.5 3.2% 
			 Dorset 58.2 60.1 3.2% 0.0 0.0 60.1 3.2% 
			 Durham 80.5 84.1 4.4% -0.5 -0.5 83.1 3.2% 
			 Essex 157.7 162.8 3.2% 0.0 0.0 162.8 3.2% 
			 Gloucestershire 52.9 54.6 3.2% 0.0 0.0 54.6 3.2% 
			 Hampshire 184.7 190.6 3.2% 0.0 0.0 190.6 3.2% 
			 Hertfordshire 106.9 110.5 3.3% 0.0 0.0 110.5 3.3% 
			 Humberside 114.2 117.9 3.2% 0.2 0.2 118.4 3.6% 
			 Kent 170.9 176.4 3.2% 0.0 0.0 176.4 3.2% 
			 Lancashire 181.4 187.2 3.2% 0.4 0.2 187.8 3.5% 
			 Leicestershire 102.5 106.5 3.9% -0.3 -0.2 105.9 3.3% 
			 Lincolnshire 54.3 56.2 3.4% 0.0 0.0 56.2 3.4% 
			 Norfolk 77.3 80.6 4.3% -0.5 -0.3 79.8 3.2% 
			 North Yorkshire 68.4 70.5 3.2% 0.0 0.0 70.5 3.2% 
			 Northamptonshire 66.6 68.8 3.2% 0.1 0.0 68.9 3.4% 
			 Nottinghamshire 122.8 127.9 4.1% -0.6 -0.4 127.0 3.4% 
			 Staffordshire 106.9 110.4 3.2% 0.0 0.0 110.4 3.2% 
			 Suffolk 63.3 65.3 3.2% 0.0 0.0 65.3 3.2% 
			 Surrey 90.8 93.7 3.2% 0.0 0.0 93.7 3.2% 
			 Sussex 150.6 155.4 3.2% 0.0 0.0 155.4 3.2% 
			 Thames Valley 211.1 218.1 3.3% 0.0 0.0 218.1 3.3% 
			 Warwickshire 46.1 47.7 3.5% 0.0 0.0 47.7 3.4% 
			 West Mercia 108.6 112.1 3.2% 0.0 0.0 112.1 3.2% 
			 Wiltshire 57.9 59.9 3.5% -0.1 -0.1 59.8 3.2% 
			 Shires Total 3,238.0 3,347.9 3.4% -1.1 -0.9 3,345.9 3.3% 
			 English Metropolitan forces 
			 Greater Manchester 404.4 417.8 3.3% 0.8 0.3 418.9 3.6% 
			 Merseyside 237.5 245.2 3.2% 0.5 0.5 246.3 3.7% 
			 Northumbria 222.8 229.9 3.2% 0.5 0.2 230.6 3.5% 
			 South Yorkshire 179.8 187.7 4.4% -1.0 -1.1 185.6 3.2% 
			 West Midlands 419.1 434.1 3.6% 0.8 0.0 434.8 3.7% 
			 West Yorkshire 296.6 306.5 3.4% 0.6 0.2 307.3 3.6% 
			 Mets Total 1,760.3 1,821.2 3.5% 2.2 0.1 1,823.5 3.6% 
			 London forces 
			 GLA—Police 1,763.6 1,820.0 3.2% 4.3 1.0 1,825.3 3.5% 
			 City of London 3 19.5 21.8 N/A N/A N/A 21.8 N/A 
			 London Total 1,783.1 1,841.8 N/A N/A N/A 1,847.1 N/A 
			 English Total 6,781.3 7,010.9 3.4% 5.4 0.1 7,016.4 3.5% 
			 Welsh forces 
			 Dyfed-Powys 4 47.4 48.9 3.2% 0.0 0.0 48.9 3.3% 
			 Gwent 4 73.1 76.0 4.1% -0.3 -0.3 75.4 3.2% 
			 North Wales 4 70.0 72.7 3.9% -0.2 -0.2 72.2 3.2% 
			 South Wales 4 161.0 166.3 3.3% 0.1 0.1 166.4 3.4% 
			 Welsh total 351.4 363.9 3.6% -0.4 -0.5 363.0 3.3% 
			 TOTAL 7,132.7 7,374.8 3.4% 4.9 -0.3 7,379.4 3.5% 
		
	
	Notes:
	1 Rounded to the nearest £100,000. Grant as calculated under the Local Government Finance Report (England) and Local Government Finance (Police) Report (Wales). This includes the Metropolitan Police special payment, and the effects of floors and ceilings.
	2 Base positions are adjusted for the transfer of pensions and security funding.
	3 Figures for the City of London relate to Home Office Grant only as calculated in the Police Grant Report (England and Wales). Revenue Support Grant is allocated to the Common Council of the City of London as a whole in respect of all its functions. The City is grouped with education authorities for the purposes of floors.
	4 Welsh figures include Home Office floor funding.
	
		Table 3: Police grant allocations by English and Welshpolice authority 2007–08
		
			 Police 2006–07FormulaAllocation 1 2007–08FormulaAllocation 1 Change on2006–07FormulaAllocation 
			 Authority £m £m % 
		
		
			 English Shire forces 
			 Avon & Somerset 157.7 163.7 3.8% 
			 Bedfordshire 64.0 66.4 3.8% 
			 Cambridgeshire 73.8 76.6 3.7% 
			 Cheshire 110.9 115.0 3.7% 
			 Cleveland 89.9 93.2 3.7% 
			 Cumbria 61.8 64.1 3.7% 
			 Derbyshire 101.1 104.9 3.8% 
			 Devon & Cornwall 171.5 177.9 3.7% 
			 Dorset 60.1 62.3 3.7% 
			 Durham 84.1 87.2 3.7% 
			 Essex 162.8 168.8 3.7% 
			 Gloucestershire 54.6 56.6 3.7% 
			 Hampshire 190.6 197.6 3.7% 
			 Hertfordshire 110.5 114.6 3.7% 
			 Humberside 117.9 122.3 3.7% 
			 Kent 176.4 182.9 3.7% 
			 Lancashire 187.2 194.1 3.7% 
			 Leicestershire 106.5 110.5 3.7% 
			 Lincolnshire 56.2 58.3 3.8% 
			 Norfolk 80.6 83.6 3.7% 
			 North Yorkshire 70.5 73.2 3.7% 
			 Northamptonshire 68.8 71.3 3.7% 
			 Nottinghamshire 127.9 132.7 3.7% 
			 Staffordshire 110.4 114.5 3.7% 
			 Suffolk 65.3 67.7 3.7% 
			 Surrey 93.7 97.2 3.7% 
			 Sussex 155.4 161.1 3.7% 
			 Thames Valley 218.1 226.2 3.7% 
			 Warwickshire 47.7 49.5 3.8% 
			 West Mercia 112.1 116.2 3.7% 
			 Wiltshire 59.9 62.2 3.7% 
			 Shires Total 3,347.9 3,472.2 3.7% 
			 English Metropolitan forces 
			 Greater Manchester 417.8 433.3 3.7% 
			 Merseyside 245.2 254.3 3.7% 
			 Northumbria 229.9 238.5 3.7% 
			 South Yorkshire 187.7 194.6 3.7% 
			 West Midlands 434.1 450.5 3.8% 
			 West Yorkshire 306.5 318.0 3.7% 
			 Mets Total 1,821.2 1,889.2 3.7% 
			 London forces 
			 GLA—Police 1,820.0 1,887.4 3.7% 
			 City of London 2 21.8 22.8 N/A 
			 London Total 1,841.8 1,910.2 N/A 
			 English Total 7,010.9 7,271.6 3.7% 
			 Welsh forces 
			 Dyfed-Powys 3 48.9 50.7 3.7% 
			 Gwent 3 76.0 78.8 3.7% 
			 North Wales 3 72.7 75.4 3.7% 
			 South Wales 3 166.3 172.5 3.7% 
			 Welsh total 363.9 377.4 3.7% 
			 TOTAL 7,374.8 7,649.0 3.7% 
		
	
	Notes:
	1 Rounded to the nearest £100,000. Grant as calculated under the Local Government Finance Report (England) and Local Government Finance (Police) Report (Wales). This includes the Metropolitan Police special payment, and the effects of floors and ceilings.
	2 Figures for the City of London relate to Home Office Grant only as calculated in the Police Grant Report (England and Wales). Revenue Support Grant is allocated to the Common Council of the City of London as a whole in respect of all its functions. The City is grouped with education authorities for the purposes of floors.
	3 Welsh figures include Home Office floor funding.
	
		Table 4: Specific grant allocations in 2006–07 and 2007–08 compared with 2005–06
		
			 Year on year increase 
			  2005–06 2006–07 2007–08 2006–07 2007–08 
			  £m £m £m % % 
		
		
			 Crime Fighting Fund 277 277 277 0% 0% 
			 Neighbourhood Policing Fund 37 88 340 138% 286% 
			 Community Support Officers 42 44 47 5% 7% 
			 Counter Terrorism (Existing provision) 99 99 99 0% 0% 
			 Basic Command Units 50 50 50 0% 0% 
			 Initial Police Learning and Development Programme 5 13 13 171% 0% 
			 Other 49 17 14 -65% -18% 
			 Total specific grant 559 588 840 5.2% 42.9%